Archive for May, 2017

Certain portions of the DOL’s fiduciary rule under ERISA will become effective on June 9, 2017. Although enforcement of the rule will not begin until January 1, 2018 so long as there’s good faith effort, most investment advisers will find compliance easy. The imminent provisions expand the definition of “fiduciary investment advice” under ERISA. That definition will now include recommendations with respect to the rollover, transfer or distribution of assets from one retirement plan to another. Investment advisers should confirm that they continue to make rollover recommendations that are in the best interest of their clients. Additionally, advisers need to implement certain disclosures to clients under ERISA.

Members of MarketCounsel’s compliance management programs can find more information on the Rule, including effective dates, exemptions, and sample disclosures on RIAglass.

On May 17, 2017, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) released a National Exam Program Risk Alert regarding the widespread WannaCry ransomware attack. The hackers behind the attack are gaining access to servers either through Microsoft Remote Desktop Protocol or the exploitation of a Windows vulnerability. Supposedly, some networks have also been affected through phishing emails and malicious websites.

The Alert encouraged advisers to review an alert published by the US Department of Homeland Security’s Computer Emergency Readiness Team, and evaluate whether applicable Microsoft patches are properly and timely installed. The Alert also reminded advisers of other guidance provided by the SEC on cybersecurity preparation.

Members of MarketCounsel’s compliance management programs can find more information on the Ransomware Alert and other cybersecurity articles on RIAglass.

“They’ll continue to find lucrative hunting grounds for broker-dealers,” says Brian Hamburger, president and CEO of MarketCounsel, a legal and compliance firm. “Broker-dealers are under fire,” he says. “What they’re selling — let’s be blunt about it, it’s fallen out of favor.”

Hamburger has observed a shift in how the SEC has handled enforcement over the last year or so. He says that he has seen SEC enforcement staffers get involved earlier in the examination process — what he described as “pre-enforcement.” Where there was previously “a very clear line between examination or investigation and enforcement,” he says , “we’re seeing that line really blurred over the last several months.” Now, following an examination, it is common for an examiner to summon a firm’s principals to an SEC office for a meeting attended by enforcement attorneys, creating a “slippery slope between examination and enforcement that we didn’t used to have to deal with,” he says.

Clayton, a newcomer to government, is something of an unknown quantity, though in the short term, it seems likely that many staff-level initiatives will continue, says Brian Hamburger, president and CEO of MarketCounsel, a legal and compliance firm. “On the macro level, the good thing and the bad thing about the SEC is that things don’t change very quickly,” Hamburger says. Hamburger agrees that significant new rule-makings that add new regulations to the financial services sector are unlikely, though he does expect Clayton’s SEC to maintain a robust enforcement operation that will “have a meaningful impact on the industry.”